Cable is seeing very choppy trade as we start the new week. Having closed around 1.6090 in North America Friday, it has since traded to a high around 1.6395 and is presently back down at 1.6245. The lack of clear direction is probably understandable. The pound garnered support from improved sentiment in Asia and a cautious return of risk appetite. However one of the factors underpinning this renewed optimism is the probability of interest rate cuts this week by the RBA, ECB and BOE. And here’s the conundrum, interest rate cuts obviously mean diminished yields seen by many as a negative for a currency. So any interest rate cut is a double-edged sword at the present time for cable, and this will go a long way to explaining the skittish market activity in the pairing. One thing should be said though, a 50 bps rate cut this week is almost certainly fully discounted in current cable levels. However, there is increasing speculation that the Old Lady might just cut aggressively by 100 bps given ongoing evidence of a rapidly cooling U.K. economy. While I’d like to go along with this speculation, and heaven knows the economy needs all the help it can get, i still feel the bank will follow a more cautious path and only cut 50bps. This is one ocassion when i really hope I’m wrong!!!!